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Endeavour hastens Ity optimization project on ‘excess cash generation’

Endeavour Mining has accelerated an optimization project at its cornerstone Ity mine in Côte d’Ivoire. (Credit: Endeavour Mining).

Endeavour Mining (TSX: EDV; LSE: EDV) has pulled the trigger on building a recyanidation circuit at its cornerstone Ity operation in Côte d’Ivoire earlier than expected as it seeks to optimize the operation.

The US$41 million investment has been moved forward given that the operation is producing excess cash flow in the high gold price environment. With strong operational performance and a cautious approach to staggering growth projects, the company said the time was right to implement the project aimed at optimizing costs by reducing leaching and detox reagent consumption, improving discharge water quality, and increasing production through higher recovery rates.

The recyanidation process reduces cyanide consumption by capturing free cyanide from the plant tailings and recycling it back into the leach circuit while increasing recovery rates, according to the company’s May 5 press release.

Endeavour said the capital outlay for the project “screened well” within Endeavour’s capital allocation framework based on both its financial returns and positive ESG [environment, social and governance] impact. It is expected to add 87,000 oz. of additional gold production to the profile and bring US$63 million in cost savings over Ity’s current reserve life.

The addition of the recyanidation circuit has increased Ity’s 2022 nonsustaining capital expenditure (capex) guidance from US$29 million to US$60 million. The group’s total nonsustaining capex would amount to US$204 million in 2022, of which US$41.9 million has been spent in the first quarter.

On a company-wide basis, the total 2022 growth capex is expected to total US$121 million, mainly related to the Sabodala-Massawa expansion project in Senegal.

Endeavour last month launched the Sabodala-Massawa expansion project, which entails adding a 1.2 million tonne aper annum BIOX plant designed to process the high-grade refractory ore from the Massawa deposits. The expansion adds incremental production of 1.35 million oz. at an all-in sustaining cost (AISC) of US$576 per oz. over the life of the expansion project, lifting Sabodala-Massawa to top-tier status, the company said.

Endeavour has started on early-stage works, including access road and drainage construction. The engineering, procurement, construction and management contract will be awarded in the second quarter, and the construction of the plant and associated infrastructure is expected to ramp up significantly through 2022, with about US$115 million of the total US$290 million project budget to be spent this year.

“We are focused on continuing to enhance our business resilience by improving the quality of our portfolio through our attractive organic growth opportunities and optimization initiatives,” said Endeavour CEO Sebastien de Montessus. “As such, we have recently begun the expansion of Sabodala-Massawa, and the definitive feasibility study [DFS] for our Lafigué project is nearing completion.”

“In addition, we are continuously working on improving the efficiency of our operations by identifying and pursuing high-priority optimization initiatives to remain a low-cost producer despite the industry-wide inflationary pressures,” he said.

The DFS for the Lafigué project on the Fetekro property, also in Côte d’Ivoire, is slated for completion by mid-year. The company published a positive pre-feasibility study in February 2021. Given its strong exploration potential, Endeavour believes that Fetekro has the potential to become a cornerstone asset with a target of producing 209,000 oz. gold per annum over ten years at an AISC of US$838 per oz.

Endeavour is also working on a DFS for the Kalana project in Mali. It expects the study to be finalized in the second half of the year. Kalana has the potential to produce 150,000 oz. per year at an AISC of US$901 per oz. over an 11-year mine life.

Q1 production results

In its March-quarter production results report, Endeavour highlighted a 14% year-on-year production increase to 357,000 oz. at a relatively flat AISC of US$848 per oz. The company has guided for full-year output of 1.3 to 1.4 million oz. gold at an AISC of US$880 to US$930 per oz.

The company recorded a 23% year-on-year rise in operating cash flows to US$299 million, which on a per-share basis amounts to US$1.21.

Headline earnings came to US$122 million, or US49c per share, compared with US$101 million, or 48c per share a year earlier.

Endeavour reported its net cash position improved by US$90 million during the quarter to US$167 million, despite US$101 million paid in dividends to shareholders.

Endeavour’s Toronto-quoted equity on May 4 closed at $31.87, which gives it a market capitalization of $8.07 billion (US$6.33 billion). The equity has gained about 23% over the past 12 months.